Correlation Between PetroChina and Bosera CMSK

Can any of the company-specific risk be diversified away by investing in both PetroChina and Bosera CMSK at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PetroChina and Bosera CMSK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PetroChina Co Ltd and Bosera CMSK Industrial, you can compare the effects of market volatilities on PetroChina and Bosera CMSK and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PetroChina with a short position of Bosera CMSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina and Bosera CMSK.

Diversification Opportunities for PetroChina and Bosera CMSK

0.65

Correlation Coefficient

PetroChina  Bosera CMSK

Poor diversification

The 3 months correlation between PetroChina and Bosera is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Bosera CMSK Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosera CMSK Industrial and PetroChina is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PetroChina Co Ltd are associated (or correlated) with Bosera CMSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosera CMSK Industrial has no effect on the direction of PetroChina i.e., PetroChina and Bosera CMSK go up and down completely randomly.

Pair Corralation between PetroChina and Bosera CMSK

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 1.49 times more return on investment than Bosera CMSK. However, PetroChina is 1.49 times more volatile than Bosera CMSK Industrial. It trades about 0.03 of its potential returns per unit of risk. Bosera CMSK Industrial is currently generating about 0.0 per unit of risk. If you would invest  766.00  in PetroChina Co Ltd on October 5, 2024 and sell it today you would earn a total of  119.00  from holding PetroChina Co Ltd or generate 15.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PetroChina Co Ltd  vs.  Bosera CMSK Industrial

PetroChina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroChina Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PetroChina is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bosera CMSK Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bosera CMSK Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bosera CMSK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PetroChina and Bosera CMSK

The main advantage of trading using opposite PetroChina and Bosera CMSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Bosera CMSK can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bosera CMSK will offset losses from the drop in Bosera CMSK's long position.

The idea behind PetroChina Co Ltd and Bosera CMSK Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.